European Summary and Highlights 22 Feb
The USD continued to lose ground against the riskier currencies through the European morning, helped by further rises in UK and EZ PMI, although the USD was off its lows by the end of the session.
European morning session
The USD continued to lose ground against the riskier currencies through the European morning, helped by further rises in UK and EZ PMI, although the USD was off its lows by the end of the session. EUR/USD hit a high of 1.0890 after the release of strong French PMI, but fell back as the German PMI came in weaker than expected. However, the Eurozone PMI was still stronger than expected, and EUR/USD finished the session up around 20 pips at 1.0860. EZ composite PMI rise a point to 48.9, beating the 48.5 consensus.
GBP/USD made slightly larger gains through the session, rising 30 pips to 1.2680 after hitting a high of 1.2709. GBP/USD gains saw a similar pattern to the EUR move, but held up better after the German data, although GBP/USD did fall slightly after the UK PMI even though this was on the strong side of expectations. UK composite PMI was up 0.4 to 53.3, which was also 0.4 above the 52.9 consensus.
The USD was also weaker against the commodity currencies, which gained ground early in the session before the PMI releases, helped by the continued risk positive tone in equity markets, with European equity indices making new post-2000 highs. AUD and CAD were both around 0.3% higher on the session. USD/JPY and USD/CHF were both little changed, ensuring new multiyear highs in GBP/JPY, AUD/JPY and CAD/JPY.
Asia session
Speaking in front of the parliament, Ueda says that Japan's trend inflation heightening and will make appropriate monetary policy decision. As this is the market consensus, without any concrete action, it is hard to see it will have any lasting impact in the market. And indeed, JPY gained a few pips with JGB yields reversing earlier losses on the comment yet it is marginal. Ueda also mentioned a 1% rise in interest rates will lead to 40 trln yen worth of valuation loss on BOJ’s JGB holdings, which seems to suggest hte pace and magnitude of hikes will be gradual. USD/JPY is trading 0.02% higher with 10yr JGB yields rising and U.S. T-yields dips.
Global risk sentiment is broadly positive after Nvidia earning beat estimate the Chinese government introduce new measures to limit institutional players selling shares. There is limited impact from New Zealand's weak trade balance for January with both the export and import shrunk as the RBNZ and market participants focus revolves around inflation figures. NZD/USD is trading 0.2% higher at 0.6192, AUD/USD is also 0.1% higher at 0.6558 while USD/CAD slips 0.17% to 1.3483. Elsewhere, EUR/USD is up 0.11% and GBP/USD is up 0.03%.